by John Darer CLU ChFC CSSC
One structured settlement professional has been advertising that it has language to put into a HIPAA Release that purports to limit the distribution of a plaintiff's medical records in such a way to prevent the defendant from obtain rated ages. The purpose of the settlement professional's restricted language, says the settlement professional, is to prevent the defendant from profiting off the plaintiff's loss and also to prevent the defendant from being able to use the rated ages as part of trial testimony to discount the damages and "taint the jury".
This concept, first put forth by Richard B. Risk, Jr., then a structured settlement consultant and now a lawyer in Tulsa, OK in a newsletter article in 2003 raises some particularly interesting issues related to New York cases.
Before we get to New York, let us address a couple of points:
The settlement professional failed to address that there are specific carve outs under HIPAA. For example, the HIPAA privacy rule does not apply to entities that are either worker's compensation insurers, worker's compensation administrators, agencies or employees, except to the extent that they may otherwise be covered entities.
HIPAA Does Not Preempt State Litigation Practice
The structured settlement planner failed to address that HIPAA does not preempt state litigation practice. According to preliminary research conducted by this author, HIPAA was enacted to ensure the security of electronic health information which it has stored and when it was exchanged between entities' health care providers, insurers and the like doing routine business. It was not intended to restrict anything that occurred during litigation.
With respect to New York and the applicability of the settlement planner's suggestion:
First, New York juries never hear annuitist testimony. Any damages testimony is NOT reduced to present value. Section 4111 of the New York CLPR (Civil Practice Law Rules) provides for an itemized jury verdict. The statutory guidelines of CPLR Articles 50A and 50B embody calculations that provide for present value reductions post-verdict.
Second, faced with a severely impaired plaintiff, where causation against the defendant is strong, defendants generally tread carefully on the issue of the plaintiff's life expectancy. Nevertheless, the issue may need to be visited if they perceive the plaintiff's assessment is overly speculative. In such cases the issue of a rated age offered by an annuity issuer would NOT be introduced into testimony as evidence. Rather the defense may conduct its own independent medical examination of the plaintiff.
Third, depending on the damage components and the plaintiff's prognosis, the life contingent elements of a CPLR 50A or 50B structured judgment annuity, for a severely impaired plaintiff, are MUCH LESS favorable for the plaintiff and his/her heirs than a negotiated and fully customized structured settlement. If the case goes to a judgment and the bulk of the damages are for pain and suffering or future medicals, those damages are paid via temporary life annuities where payments cease upon the plaintiff's death. Millions of dollars of recovery up in smoke.
CPLR 50A or 50B structured judgment annuities are owned by the defendant or the defendant's insurer. Unless there is some satisfaction to be had that the defense will pay more money (to buy standard priced structured judgment annuities) that the severely impaired plaintiff's estate (AND the defendant or insurer) will never likely recover if the plaintiff dies before the cost of the life contingent elements, and the cost of money, is fully recovered, it's hard to see how this makes sense. The plaintiff gets no added benefit from the defendant or its insurer paying even a penny more for the annuities to fund a CPLR 50A or 50B structured judgment.
The settlement planner in question has already admitted that he helps tort victims (for whom he has not previously placed a structured settlement) factor, with him being financial compensated. Would he now advise that the tort victim cut off his/her nose to spite his/her face and take the inflexible uncustomized structured judgment so that the settlement professional can then help the tort victim factor those structured judgment payments for a potentially deeper discount than he's trying to prevent with his "HIPAA strategy"? Also consider that if the plaintiff reaches the stage of the entry of a structured judgment there is likely pre-judgment interest which would be paid in a lump sum, not tax deferred through a non qualified assignment.
On New York cases, rated ages help both sides who wish to compromise pre or post verdict. If settlement professionals are well versed in CPLR Articles 50A and 50B they can provide meaningful assistance to the parties in the evaluation process. A rated age survey of the 3 structured judgment annuity markets and 11 structured settlement markets will help either sides' life expectancy assessment on an impaired case, especially when there is a wide disparity in rated age assessment among the underwriters.
With all due respect to HIPAA, the sanctity of personal information and, setting aside the significant personal financial gain that this author and others could theoretically get from encouraging clients to employ the aforementioned settlement professional's proposed strategy to box out other settlement professionals, it's evident, in my opinion, that the settlement professional's proposed strategy is simply a "gimmick" costumed in good intent yet designed to line the settlement professional's pockets.
On the HIPAA privacy issue, but unrelated to the above issue, the New York Court of Appeals, New York's highest court recently decided that defendants have permission to privately interview the treating physicians of personal injury plaintiffs after the close of discovery. In permitting this, the Court appears to have cast aside the privacy provisions of HIPAA. New York attorney Eric Turkewitz, Esq. of the New York Personal Injury Law Blog has a good write up on the November 27, 2007 decision in Arons v Jutkowitz. Please click here